Fitch Affirms Kaiser Permanente's Rating at 'A/F1'; Outlook Positive.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. affirms the ratings on approximately $2.7 billion of outstanding debt issued on behalf of Kaiser Permanente Kaiser Permanente is an integrated managed care organization, based in Oakland, California, founded in 1945 by industrialist Henry J. Kaiser and physician Sidney R. Garfield. . A list of outstanding debt issues are provided below. The Rating Outlook has been revised to Positive from Stable. The rating affirmation A solemn and formal declaration of the truth of a statement, such as an Affidavit or the actual or prospective testimony of a witness or a party that takes the place of an oath. An affirmation is also used when a person cannot take an oath because of religious convictions. and Positive Rating Outlook reflect Kaiser's continued improvement in its financial profile and the underlying strength and diversity of Kaiser's unique integrated health care integrated health care, n healthcare services combining the best of conventional and complementary health care. delivery system. Kaiser's financial profile can be characterized by strong and improving operating performance and strong balance sheet fundamentals in recent years. Kaiser's operating and excess margins improved to 5% and 5.7%, respectively, in 2004, from 3.6% and 4.0% in 2003. Continued improvement in operating profitability has contributed to growth in unrestricted short-term marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has , which amounted to approximately $4.6 billion at Dec. 31, 2004. This level of short-term marketable securities equated to 65 days cash on hand and 173% cash to debt. Fitch notes that Kaiser also has approximately $5.9 billion of noncurrent marketable securities on the balance sheet, a portion of which could be used to supplement operating cash on hand. Kaiser's debt burden remains low as indicated by maximum annual debt service (excluding the impact of off-balance sheet transactions) as a percentage of revenue of 1.2%, debt to earnings before interest, taxes, depreciation, and amortization Earnings before interest, taxes, depreciation, and amortization (EBITDA) A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. of 1.0 times (x) and debt service coverage of 7.6x. Kaiser's improving profitability in 2004 was largely due to an attractive commercial premium pricing Premium pricing is the practice of keeping the price of a product or service artificially high in order to encourage favorable perceptions among buyers, based solely on the price. environment and improved Medicare funding. Through the first quarter, ended March 31, 2005, Kaiser posted an operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. of $481 million equating e·quate v. e·quat·ed, e·quat·ing, e·quates v.tr. 1. To make equal or equivalent. 2. To reduce to a standard or an average; equalize. 3. to an operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: of 6.2%, largely driven by membership growth from the introduction of new product offerings. Primary credit concerns include challenges associated with implementation of two major systems projects, sizable siz·a·ble also size·a·ble adj. Of considerable size; fairly large. siz  a·ble·ness n. capital needs, exposure to changes in Medicare funding, and the continued rising cost of health care delivery. Kaiser is installing a clinical information system (KP-Health Connect) in each of its regions, which is ultimately expected to lead to efficiencies and cost savings from improvements in the quality of care, patient safety, and the delivery of care. However, the overall scale of this system and planned upgrades to the company's internal medical cost administration systems create additional operational uncertainties during systems development and implementation. Kaiser is implementing a new internal medical cost administration system to transition to more of an industry standard, risk-based approach to underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. over the next 18 months. The proposed change in underwriting approach should allow Kaiser to remain competitive in the commercial market and reduce the company's exposure to anti-selection. However, Fitch believes that during the transition period Kaiser will be exposed to an increased risk of premium mispricing. Kaiser's 2004 capital expenditures totaled $2.2 billion, of which approximately 25% was designated for KP-Health Connect and information technology. Significant future capital investments include information technology investments ($1.3 billion over the next three years), reaching seismic compliance in all of its hospitals ($5 billion through 2013), and general facility maintenance and replacement ($500 million annually). Kaiser's Medicare Advantage business represents approximately 10% of membership and 27% of total revenues. While per member per month premiums have been favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. since the passage of the Medicare Modernization modernization Transformation of a society from a rural and agrarian condition to a secular, urban, and industrial one. It is closely linked with industrialization. As societies modernize, the individual becomes increasingly important, gradually replacing the family, Act in 2003, primary concerns center around the non-negotiated nature of the reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. rate setting process, overall funding levels, and the long-term viability of the program. Fitch's Positive Outlook reflects the expectation that Kaiser's reputation and benefits to be derived from KP-Health Connect should allow the system to continue to produce strong operating results despite ongoing challenges specific to Kaiser and inherent in the industry. Sustained operating profitability over the next two to three years similar to fiscal years 2003 and 2004 results could warrant a rating upgrade. Kaiser Permanente is a large not-for-profit integrated health care delivery system headquartered in Oakland, California “Oakland” redirects here. For other uses, see Oakland (disambiguation). Oakland (IPA: /ˈoʊklənd/), founded in 1852, is the eighth-largest city in the U.S. operating a health plan and 30 hospitals. Physician services are rendered via eight independent medical groups, which comprise over 11,500 physicians. In 2004, Kaiser had approximately 8.3 million members in its health plan and total operating revenues operating revenue Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. of $28 billion. Kaiser covenants to disclose quarterly and annual disclosure to bondholders. Kaiser's disseminates quarterly financial information through the Nationally Recognized Municipal Securities Information Repositories An information repository is an easy to deploy secondary tier of data storage that can comprise multiple, networked data storage technologies running on diverse operating systems, where data that no longer needs to be in primary storage is protected, classified according to captured . Quarterly disclosure to-date includes a balance sheet, income statement, and cash flow statement. The following outstanding debt bonds are rated 'A/F1' by Fitch. The long-term rating is based on Kaiser Permanente's credit quality, the short-term rating on its internal liquidity: --$150,000,000 California Statewide Communities Development Authority, revenue bonds (Kaiser Permanente), series 2004 E (one-year put bonds); --$150,000,000 California Statewide Communities Development Authority, revenue bonds (Kaiser Permanente), series 2004 F (three-year put bonds); --$150,000,000 California Statewide Communities Development Authority, revenue bonds (Kaiser Permanente), series 2004 G (three-year put bonds); --$150,000,000 California Statewide Communities Development Authority, revenue Bonds (Kaiser Permanente), series 2004 K (unenhanced commercial paper); --$100,000,000 California Statewide Communities Development Authority revenue bonds (Kaiser Permanente), series 2004 L (unenhanced variable-rate demand obligations variable-rate demand obligation A floating-rate debt obligation that has a nominal long-term maturity as well as an option allowing the investor to put (sell) the obligation back to the trustee, generally at par plus accrued interest. ); --$150,000,000 California Statewide Communities Development Authority Revenue Bonds (Kaiser Permanente), series 2004 M (unenhanced variable-rate demand obligations --$60,000,000 California Statewide Communities Development Authority, revenue bonds (Kaiser Permanente), series 2003 A; --$46,600,000 California Statewide Communities Development Authority, revenue bonds (Kaiser Permanente), series 2003 B; --$48,960,000 California Statewide Communities Development Authority, revenue bonds (Kaiser Permanente), series 2003 C; --$57,500,000 California Statewide Communities Development Authority, revenue bonds (Kaiser Permanente), series 2003 D. The following bonds are rated 'A' by Fitch, based on Kaiser Permanente's credit quality: --$150,000,000 California Statewide Communities Development Authority revenue bonds (Kaiser Permanente), series 2004 H (4-year put bonds); --$150,000,000 California Statewide Communities Development Authority revenue bonds (Kaiser Permanente), series 2004 I (7-year put bonds); --$60,000,000 California Health Facilities Financing Authority, revenue bonds (Kaiser Permanente), 1993 series C; --$100,000,000 California Health Facilities Financing Authority, semiannual Semiannual An event that occurs twice in a calendar year. Notes: A bond with semiannual coupons would issue payment once every six months. See also: Annual, Bond, Coupon Bond tender revenue bonds (Kaiser Permanente Medical Care Program), series 1985; --$60,000,000 California Health Facilities Financing Authority, semiannual tender revenue bonds (Kaiser Permanente Medical Care Program), series 1983; --$500,000,000 California Statewide Communities Development Authority, revenue bonds (Kaiser Permanente), series 2002 A, B, C, D, and E; --$275,000,000 California Statewide Communities Development Authority, variable-rate revenue bonds (Kaiser Permanente), series 2001A, B, and C; --$12,825,000 Maryland Health and Higher Educational Facilities Authority, revenue bonds (Kaiser Permanente), 1998 series A; --$11,998,777 California Health Facilities Financing Authority, revenue bonds (Kaiser Permanente), 1989 series A, capital appreciation serial bonds A; --$118,240,000 Kaiser Permanente, Kaiser Foundation The mission of the Kaiser Foundation is to assist individuals and communities in preventing and reducing the harm associated with problem substance use and addictive behaviours. 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--$20,000,000 Kaiser Permanente, Kaiser Foundation Hospital, Kaiser Foundation Health Plan, Inc., medium-term notes Medium-term note (MTN) A corporate debt instrument that is continuously offered to investors over a period of time by an agent of the issuer. Investors can select from maturity bands of: 9 months to 1 year, more than 1 year to 18 months, more than 18 months to 2 years, etc. (taxable). The following bonds have underlying ratings of 'A' by Fitch. The bonds are insured by Financial Security Assurance Inc. whose insurer financial strength is rated 'AAA' by Fitch: --$87,500,000 California Statewide Communities Development Authority, insured revenue bonds (Kaiser Permanente), series 2004A; --$87,500,000 California Statewide Communities Development Authority, insured revenue bonds (Kaiser Permanente), series 2004B; --$87,500,000 California Statewide Communities Development Authority insured revenue bonds (Kaiser Permanente), series 2004C; --$87,500,000 California Statewide Communities Development Authority insured revenue bonds (Kaiser Permanente), series 2004D. The following bonds are rated 'A/F1' by Fitch. The long-term rating is based on Kaiser Permanente's credit quality, the short-term rating on a liquidity facility provided by JP Morgan Chase Bank. --$100,000,000 California Statewide Communities Development Authority revenue bonds (Kaiser Permanente), series 2004J (enhanced variable-rate demand obligations). The following commercial paper is rated 'F1' by Fitch: --Kaiser Foundation Hospitals Commercial Paper Program. The following carry insurer financial strength ratings of 'A' by Fitch: --Kaiser Foundation Health Plan, Inc.; --Kaiser Foundation Health Plan of the Northwest; --Kaiser Foundation Health Plan of Georgia, Inc.; --Kaiser Foundation Health Plan of the Mid-Atlantic States Mid-At·lan·tic States See Middle Atlantic States. Noun 1. Mid-Atlantic states - a region of the eastern United States comprising New York and New Jersey and Pennsylvania and Delaware and Maryland U.S.A. , Inc.; --Kaiser Foundation Health Plan of Colorado; --Kaiser Foundation Health Plan of Ohio. The following off-balance sheet debt is not rated by Fitch: --$6,930,000 California Infrastructure and Economic Development Bank, capital certificates (Kaiser Hospital Assistance I-LLC), series 2001C; --$169,505,000 California Infrastructure and Economic Development Bank, revenue bonds (Kaiser Hospital Assistance I-LLC), series 2001A; --$28,110,000 California Infrastructure and Economic Development Bank, revenue bonds (Kaiser Hospital Assistance I-LLC), series 2001B; --$63,425,000 City of Oakland, California, insured revenue bonds (1800 Harrison Foundation), series 1999 A; --$15,720,000 City of Oakland, California insured revenue bonds (1800 Harrison Foundation), series 1999 B; --$27,000,000 City of Oakland, California, insured revenue bonds (1800 Harrison Foundation), series 1999 A (taxable). |
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